# West v. East

By [DYLIT Media Buzz](https://dylit.info/user/dylitmediabuzz)

[GeoPulse](https://dylit.info/pr/geopulse/6a4e89c325b94158fd865a00) > [West v. East](https://dylit.info/ch/west-v-east/6a4e89c325b94158fd865a40)

China's Rare Earth and Semiconductor Leverage: A Strategic Rundown Over the past three years, Beijing has increasingly used its dominance over rare earth minerals and key links in the semiconductor supply chain as instruments of trade and technology policy, prompting reciprocal U.S. export controls and a scramble by Washington and its allies to diversify supply. The result is a fast-evolving standoff with real, measurable effects on prices, availability, and industrial planning worldwide. Background: Where China's Leverage Comes From China accounts for roughly 90% of global rare earth refining capacity and mines over 60% of raw rare earths, while manufacturing around 90% of high-performance rare-earth magnets used in motors, wind turbines, and weapons systems [Payne Institute]. It also supplies about 98% of primary gallium and 91% of primary germanium, materials used in semiconductors, fiber optics, and military-grade electronics [UNU/MERIT]. On the chip side, China is not a leading producer of the most advanced logic chips, but it holds a strong position in mature-node manufacturing, rare-earth-dependent components (magnets, sputtering targets), and materials such as gallium arsenide substrates that feed into global semiconductor supply chains. Policy Tools: Licensing, Quotas, and Blacklists China's primary lever has been export licensing rather than outright bans, though both have been used: July 2023: China required licenses for exporting gallium- and germanium-related items, the first major use of this specific tool against chip-adjacent materials. August 2023: Antimony export limits followed; Chinese antimony exports subsequently fell by roughly 97%, and global antimony trioxide prices approximately doubled. December 2024: China moved from licensing to an outright ban on exporting gallium, germanium, antimony, and superhard materials specifically to the United States, explicitly linked to expanded U.S. controls on chipmaking equipment and high-bandwidth memory. April 2025: Beijing introduced licensing requirements for seven medium and heavy rare earths — including terbium, dysprosium, samarium, gadolinium, and yttrium — used in high-temperature magnets for defense and clean-energy applications. October 9, 2025: China issued its most sweeping measures to date, modeled on the U.S. "foreign direct product rule." Announcements 61 and 62 require licenses for exporting rare-earth-related technology (mining, processing, magnet manufacturing) and, for the first time, assert extraterritorial jurisdiction — requiring licenses even for shipments between two non-Chinese countries if they contain Chinese-origin rare earth content above a 0.1% value threshold. Related measures also touched semiconductors, lithium batteries, and graphite anode materials. China has described these steps as protecting materials with "dual military and civilian uses", while U.S. and allied officials have characterized them as retaliation for American semiconductor restrictions and, more broadly, industrial policy meant to preserve Chinese leverage over downstream manufacturing. On the U.S. side, the primary tools have been the Bureau of Industry and Security's (BIS) Entity List, the Foreign Direct Product Rule (FDPR), and end-use controls. Since October 2022, the U.S. has restricted exports of advanced chips, chipmaking equipment, and related software to China, expanding the FDPR in 2024 to cover semiconductor manufacturing equipment and adding roughly 140 Chinese entities to the Entity List that year alone [Congressional Research Service; Edge AI and Vision Alliance]. A short-lived "AI Diffusion Rule" imposing worldwide licensing tiers was issued in January 2025 and later rescinded by the Trump administration in favor of chip-specific restrictions. Recent Impacts on the U.S. and Global Markets The practical effects have been uneven but tangible: Price and supply disruption: Chinese customs data cited in industry reporting show exports of yttrium, dysprosium, and terbium running roughly 50% below pre-restriction baselines as of mid-2026, with no fixed timetable for normalization [Tech Times]. The U.S. Geological Survey estimated in October 2024 that a full gallium-germanium export ban could cost the U.S. economy $3.4 billion in GDP. Compliance burden: The "one batch, one license" system introduced in April 2025 created significant paperwork backlogs, forcing manufacturers in autos, defense, and life sciences to document end-use and facility details for each shipment. Diplomatic De-escalation: Following an October 2025 Trump–Xi summit in Busan and a subsequent meeting in Beijing, China suspended the October 2025 expansion for one year via MOFCOM Announcements No. 70 and No. 72, and began issuing general licenses to approved exporters in December 2025. However, the underlying April 2025 licensing regime for seven heavy rare earths remains in force, and defense/aerospace end-uses remain excluded from relief. Chip market volatility: U.S. policy toward China has itself fluctuated — Nvidia's H20 chip was effectively blocked from Chinese sales in April 2025, then approved for licensed export in July 2025 after commercial and diplomatic negotiation, illustrating how export control enforcement has become a variable in bilateral trade talks rather than a fixed policy. Responses: Diversification, Stockpiling, and Reshoring Washington and allied governments have pursued several parallel strategies: Direct government investment: In July 2025, the Department of Defense agreed to invest $400 million in MP Materials — the operator of the only active U.S. rare earth mine, at Mountain Pass, California — making the Pentagon the company's largest shareholder with roughly a 15% stake, alongside a $150 million loan and a 10-year, 7,000-metric-ton annual magnet purchase commitment. Allied supply chains: MP Materials and the Pentagon subsequently agreed to a joint venture with Saudi Arabia's Maaden to build rare-earth refining capacity outside China, with MP/DoD holding a 49% stake. Stockpiling and equity stakes elsewhere: U.S. officials, including Interior Secretary Doug Burgum, have signaled interest in expanding critical mineral stockpiles and taking direct equity positions in other mining companies, modeled on the MP Materials deal. Export control tightening and easing in tandem: The U.S. has continued adding Chinese entities to the BIS Entity List (65 additions reported in 2025) while periodically relaxing specific chip restrictions as part of broader trade negotiations, reflecting competing priorities between national security agencies and commercial/diplomatic interests. Conclusion China's use of rare earth and semiconductor-adjacent export controls has shifted from case-by-case licensing to a broader, at times extraterritorial, regulatory architecture, while the United States has responded with its own export restrictions, entity blacklisting, and — more recently — direct public investment in domestic mining and processing. Both governments have shown willingness to escalate and then partially de-escalate these measures around high-level diplomatic meetings, suggesting the tools are being used as much for negotiating leverage as for fixed strategic denial. Given the multi-year timelines required to build alternative mining, refining, and magnet-manufacturing capacity, analysts generally expect China's structural dominance in rare earth processing to persist into the late 2020s even as diversification efforts proceed. Sources Andersen Institute, "China's Export Control Architecture" — anderseninstitute.org AP via 2news.com, "China bans exports to US of gallium, germanium, antimony" — 2news.com East Asia Forum, "China leverages paperwork to ration rare earths" — eastasiaforum.org Tech Times, "China Rare Earth Export Controls: April Curbs Still Bite" — techtimes.com White & Case, "China imposes extraterritorial jurisdiction... export controls on rare earth" — whitecase.com